What the German Bond Auction Disaster Means

This morning the German government held an auction for 10-year money at just under 2 percent. The auction failed disastrously with a bid-to-cover ratio of just 1.1. The Germans wanted to issue 6 billion euros of 10-year bunds but managed to sell only 3.64 billion, with the central bank picking up 39 percent of the issue.

Many media outlets are reporting the disastrous bond auction results in Germany as an ominous sign. I am of two minds on this. Yes, this was a terrible auction but it is just one auction. So let’s not blow it out of proportion. There is still some time left.